Tax Credit Category: Personal (8)

Tax Credit: General Business (3)

1. Research and Development2. Rehabilitation3. Miscellaneous

3

Predetermined Order of Credits

1. Personal/nonrefundable - limited to gross tax and no carryover of excess2. General business - limited to % of gross tax after personal credits and carryover = back 1 yr/forward 20yrs3. Refundable Credits - applied last b/c no limit based on tax (excess is refunded)

4

Personal Credit: Child Credit

1. $1,000 Child Credit allowed for each qualifying child2. Phased out w/ AGI greater than $110K (m)/$75K (s)... $50 for each $1K over trigger3. Additional is refundable to extent of 15% of earned income in excess of $3K

5

Personal Credit: Education

1. Hope Credit/American Opportunity Tax Credit: $2,500/yr ($100% of 1st $2K, 25% of next $2K2. Lifetime Learning Credit: $2K per tax year (20% of $10K education expenses)3. cant use both in one year

6

Personal Credit: Saver's Credit

Personal Credit: Dependent Care

1. To be eligible, person needing care must live with taxpayer more than 1/2 year2. Expenditures for household services are care and are required for credit3. Calculation = qualifying expenditures by appropriate credit % (35% AGI under $15K reduced by 1% for each $2K part above $15K. Minimum is 20% or $43K)4. Maximum = $3K or $6k if more than one dependent qualifies

Increases if taxpayer maintains a home with qualifying children.

Personal Credit: Health Coverage

1. 72.5% of COBRA 2. Affordable Care Act

Business Credit: Foreign Tax Credit

To prevent double taxation of foreign income taxed in foreign jurisdiction. Limited to lower of foreign tax paid or proportion of US tax allocable to foreign sourced income.

Example: 20% income from abroad... can claim foreign tax credit of lesser of amount of foreign tax paid or 20% of US tax paid... (example calculates this as us tax x foreign taxable / worldwide taxable instead of flat 20%)

Excess: Back 1 year or forward 10

15

In Lieu of Foreign Tax Credit

1. Can claim foreign tax as itemized deduction2. Can exclude income earned while bona fide resident in foreign country ($99,200 max, must live in country min 330 days/yr)

16

Net Regular Tax Liability

Regular tax less personal credits

17

General Business Credit

Combination of credits, calculated individually and subject to an overall limit

* Excess carried back 1 year or forward 20

Business Credit: Rehabilitation

Qualifying expenditures may adjust basis and be subject to recapture:1. adjusted basis of property reduced by amount of credit2. credit recaptured if building held less than 5 yrs

20

Business Credit: Small Employer Health Insurance for Eligible Small Employer (ESE)

1. ESE can claim credit = 35% of nonelective contributions for health ins for employees2. To be eligible, ESE must contribute more than 50% of employee insurance premiums under a contribution arrangement3. Full credit only available when ESE w/ less than 10 employees have wages of less than $50K4. Owner and relatives are not treated as employees

21

Business Credit: Work Opportunity Tax Credit (WOTC) - may not be extended

Business Credit: Research

1. Incremental research expenditures eligible for 20% credit2. May use alternative simplified credit = to 14% excess of qualified research expenses greater than 50% of average research expenses for last 3 yrs